Dave Ramsey’s 7 Baby Steps plan is an amazing tool that you can use to help you create financial freedom. If you are hoping to gain control of your money and get out of debt, then this plan is an excellent way to help you begin.
The plan is a 7 step plan to help you gain wealth in a way that is possible. It’s so possible, in fact, that hundreds of thousands of people have successfully mapped out their financial future to help them become debt free.
Curious to learn more about Dave Ramsey’s 7 Baby Steps? Keep Reading…
Who is Dave Ramsey?
If you haven’t heard about Dave Ramsey, that’s all right. He is a financial advisor that has worked with hundreds of thousands of families to help reduce their debt and become wealthy.
After filing for bankruptcy himself decades ago, he determined that there must be a better way of life. A way to help him gain wealth and stay out of debt.
That’s when he established this 7 step plan, got himself out of debt, and began coaching others to help them be financially successful and accumulate wealth.
He knows that struggles that people face when it comes to living paycheck to paycheck and this plan was created to help.
Dave Ramsey’s 7 Baby Steps
This 7 step plan is a sure way to build up savings, get out of debt, and make your way to financial freedom!
Baby Step 1 – $1,000 to start an Emergency Fund
This is the first and most significant step in the plan, since it will help set the foundation for the rest of your debt-free journey. Do whatever you need to do (within reason, of course) to earn that $1,000 dollars for your emergency fund and do it quickly. Here are some ideas to earn some extra money:
Instead of getting your nails done, set aside that $50, have a garage sale, or get a part time job. Whatever you decide, make sure you are able to save that money and designate it for emergencies that will come.
You can use an app like Mint or Quicken to track your savings and expenses.
Now, this is not a ‘Macy’s is having a sale’ emergency fund, this is a fund for things like car repairs or a pipe that bursts. Save it and you will be grateful when you actually need it. Learn more about saving:
- 100+ Simple Ways to Save Money
- 10+ Money Saving Challenges
- Reverse Savings Plan
- Save $8,000 This Year
- Save Money When Living Paycheck to Paycheck
Baby Step 2 – Pay off all debt using the Debt Snowball
Debt is one of those annoying things that are always in the back of your mind. No matter what, if it’s there, it is probably bugging you. In the beginning of this article we discussed how getting out of debt needs to be one of your biggest motivations for the baby steps to work.
The debt snowball principle is designed to help you be successful by beginning to pay off your smallest amount owed first. Any extra income that you receive goes toward that one first.
Dave has proven time and time again that a simple action like that will motivate you to continue to pay off the bigger and bigger amounts owed.
Before you know it- you’ll have paid off everything! Sounds great, right? That’s because it is.
Here are some ways you can start working to get out of debt:
- 10 Tips to Become Debt Free
- How to Live Mortgage Free
- 5 Tips to Help Eliminate Debt
- 5 Things To Give Up to Get Out of Debt
Baby Step 3 – 3 to 6 months of expenses in savings
This step is so important and will bring you a lot of peace in the process. Luckily, there are lots of ways to save money so that you can save between 3-6 months of expenses in savings (scroll back up to see some options for saving money)
Having this step complete is one of the most exciting ones, in my opinion. Dave Ramsey makes this step early in his process so that you are able to build a life that you want to have.
Trust me, once you have several months of expenses saved, you will have the ability to truly look at how you spend your time and readjust things so that you can live your best life.
Maybe you want to look for another job, move closer to family, or get a pet goat (I don’t know!). Completing this step will give you the freedom to reach for the stars!
You can even start implementing some of these ways to get free internet!
Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
Retirement is something that everyone will want to do eventually and it can only happen if you plan for it. The more that you save for retirement while you are young, the better your future will look – which is why you want to follow this step!
Investing 15% of your household income into Roth IRAs and pre-tax retirement is going to help you be able to plan out the best retirement options for you.
If you’re not familiar with investing at all , you may want to check out these investment terms for beginners.
Personal Note: Once you have your emergency fund built and debt paid off, I would increase the amount you contribute to at least match your company’s match, if not more.
Baby Step 5 – College Funding for Children
Okay, here’s the deal- saving money for your children’s college fund is important. That’s why this step is on Dave Ramsey’s 7 baby steps.
Not only will it bring you peace to be able to provide your children a future, but you will be able to help your children avoid debt for their future.
Personal Note: I would recommend having kids get a job and pay for some of their expense so they can learn the ways of the world and get an understanding of money.
Baby Step 6 – Pay off home early
The next baby step feels really, really good. Think about it- you’ve already done so much to gain financial peace and security to create the life that you want to live.
So why not keep going and work hard to be able to pay off your home early? Not having the huge financial commitment of rent or a mortgage will help you be successful in the long run.
This is a huge goal of mine but it’s a long process as I live in California and my mortgage is pretty high!
Plus this step is the final one before the real fun can begin…
Baby Step 7 – Build wealth and give!
Once you have completed the other 6 of Dave Ramsey’s Baby Steps, that’s when you can really begin living your best life!
Step 7 is to build wealth and to give. What can be better? You are able to invest in things that bring you joy AND increase your income. With that, you are able to bless people along the way.
Dave encourages those who make it to this stage to give back in any way that they can. Think about how good it would feel to be able to bless a friend that can’t keep their lights on by paying their power bill for an entire year. At this step, generous gestures like that are possible.
Tips to Succeed
Something like Dave Ramsey’s 7 baby steps may seem overwhelming. Its easy to say ‘just get out of debt’ and walk away, but its not always that easy.
If you plan on applying these steps to your life in order to gain financial freedom, here are some of my top tips to help you get the ball rolling.
Set Realistic Expectations
If you are planning on completing these steps, know that it will take you longer than a week to complete them. Depending on your situation, one baby step may take you years to complete. But it’s worth it, trust me.
Use the cash envelope system
If you have been around this blog before, you know that I am a huge fan of using the cash envelope system as a budgeting tool. I even carry around a cash envelope wallet to help me stay in budget and spend only what I need to. After all, cash is king.
Looking for your own wallet? Here are my favorite cash envelope wallets
Create a Side Hustle
Side hustles are one of the best ways for you to begin earning some extra income to help you get through some of those early baby steps.
It doesn’t need to be anything extravagant- maybe a pizza delivery job a few nights a week or babysitting here and there can help that money go into getting through each baby step. Here are some side hustle ideas:
- Low Cost Business Ideas
- Freelance Writing for Beginners
- How to Become a Virtual Assistant
- How to Start a Blog
- Work at Home Jobs
Get on the same page as your partner
Going through these steps can have an incredible impact on you and your life. Think about how amazing it would be to finally stop paying those credit cards off each month!
Take the first step, for example, you cannot save a $1,000 emergency fund and keep that a secret. Eventually it will be discovered and spent on something else- unless you both agree what it is for.
Check out these financial planning tips for newlyweds.
Once you get into the habit, this trick will become second nature! There is something that feels amazing when you find something that normally would cost you hundreds of dollars for a fraction of the cost- all because it’s used.
Let me give you an example- I have been eyeing a bench for my front door from Target for months, but it was over $200 and it just wasn’t in the budget.
I went onto Facebook Marketplace and began scouring for benches. Wouldn’t you believe it? I found one for $10 and all it needed was a coat of paint.
And there are also a ton of ways to get furniture for free (or other things!).
It felt amazing and I love my new bench. I want that feeling for you! These frugal living tips can be super helpful too!
Look into opportunities to generate passive income. If you have a blog, for example, check out my book on how become an Amazon Affiliate and begin earning money on a consistent basis.
Why you should follow Dave Ramsey’s 7 Baby Steps
Still not convinced? Here are my final arguments to help encourage you to try out these steps.
As you can tell from the steps, the plan is laid out so that all you need to do is focus on the step that you are on.
The plan isn’t a huge financial commitment
Unlike most financial plans, it is reasonably priced (meaning you can start slow – not that it actually costs money) so that you can get started on your future as soon as possible.
It actually works
Hundred of thousands of people have tried and succeeded with these steps – you can too! I know it sounds scary and overwhelming, but take it one step at a time and you can join people from around the world that have worked hard to get out of debt and create financial freedom.
It’s Well Known
I love how well known Dave Ramsey’s plans are. When I started it, I knew that I needed as much support as possible.
Luckily for me, that meant sharing my journey with others that knew what I was going through. Since Dave has been established for so long, it was easy to find a support system of people that had been exactly where I was.
Plus, it can help you escape the rat race and obtain financial freedom as well!
Related: Frugal vs. Cheap
Dave Ramsey’s 7 Baby Steps were created to help you successfully create and maintain financial independence. They have worked for hundreds of thousands of people and they can work for you.
If you start at the beginning and slowly work your way through, then you too can successfully complete these steps to help you develop a life that you love.
Tell me, have you tried following these steps? What tips and tricks do you have for anyone just beginning?